Throughout 2018, Mind Your Business will be reviewing the highlights of the 2017 BizConCLE event hosted by COSE and the Greater Cleveland Partnership. Today’s article focuses on the lessons small business owners can learn from the startup success of CoverMyMeds. Read the other stories in this series here.
In January 2017, CoverMyMeds achieved what every startup company dreams of: a billion-dollar valuation and sale to a major corporation.
Funny thing is, Ted Frank, the CFO of CoverMyMeds, never really thought of the company as a startup. Rather, he and his partners viewed operated the business as a company with a long-term future instead of as a startup simply trying to survive from one round of funding to the next.
Operating with a sound, long-term business plan in mind was just one of the lessons that Frank, one of the keynote speakers at the Greater Cleveland Partnership’s and COSE’s BizConCLE event, imparted to those in attendance. In fact, Frank laid out a five-step plan that small- and mid-sized businesses can easily adopt that could put them on the same unicorn trajectory that CoverMyMeds has been on.
Step one: Focus on your distribution channel
Frank said the reason most startups fail is because their distribution channel is either misaligned or not economically viable. How do you make it viable? You enlist the help of your customers to help you grow.
It’s critical that businesses understand that their success is linked to that of the business and that your value to them increases as the business scales.
Step two: Your operating model is not an afterthought
Too many businesses believe they can bolt on their operating plan after they get funding. That’s a precarious line of thinking, particularly in the Midwest where private equity can be difficult to source and you can’t raise $300 million to build a company as some Silicon Valley firms might be able to do.
Instead, businesses in this region need to rely on great economics to succeed. And you get to those great economics by being innovative in the way you approach your business and distribution model. When you have these great economics, Frank said, it makes it easier to win because revenue becomes more of a focus instead of costs. And it’s not that profit is unimportant. It’s just that profit is baked into the business model.
Step three: Win through people
At the end of the day, the success or failure of a business is linked to the people who comprise the business. Give these employees something to be excited about, Frank said. The focus on revenue, as described above, can create opportunities for rapid growth where staffers can find opportunities to work in emerging areas of the organization.
Senior leadership should also target specific “star” employees and “connectors” in the marketplace you’re engaged in. These people will help you recruit other Rockstar employees.
And create an environment that is not restrictive (think one-page explanations of company policies) and encourages instead of punishes risk-taking. You want your employees to feel like they’re a part of something and these are just two ways of accomplishing that, he said.
Step four: Don’t rely on fundraising
One of Frank’s favorite sayings is that business owners should be focused on building a company, not a startup. As such, the business has to be one that is sustainable and does not live or die based on the availability of angel investors. If you’re focused on just surviving from the “A” round of capital raising, to the “B” round to the “C” round, etc., you’re not focused on building a company.
Put another way, if you’re raising money because you need money, you’ve already lost. Don’t worry about your exit strategy. Worry about how your business is going to help people—while also making some money along the way.
Step five: Set big goals
Don’t be afraid of setting big, hairy, audacious goals. Again, if your company is all about offense, you’re going to attract valuable heavy-hitter job candidates who want to help you do amazing things.
BizConCLE is just one example of the many educational events hosted by the Greater Cleveland Partnership and COSE each year to help give the business community the knowledge they need to make their business a success. Check out this list of upcoming events to find one that’s right for you.